CFDs are derivatives products through which you are able to trade on the movements of the live market price and you do not need to own the underlying instrument on which the contract is based. Regardless of the fact that the markets are rising or falling you can speculate on the future movement of the market prices. CFDs are contracts and they are made between the buyer and seller of the CFDs to exchange the differences in the prices of the assets when the contract was opened and closed.
What are and how to trade CFD
CFDs are leverage instruments and you can benefit from the volatility of the various financial markets without actually owning the assets based on them. You gain access to the markets which you never had with a single trading account. In the next section we will discuss how to trade CFD effectively with XFR Financial Ltd or XTrade with an example.
Let us see how to trade CFD with an example.
You think that the share of an Airlines company will rise in the coming weeks as there is some positive news from the company. You decide to buy 1000 CFDs of that Airlines Company. The quoted price of the Airlines is 10.30 at the time of opening the CFD contract through your account at XFR Financial Ltd or XTrade.
The value to total position at the opening of trade is 10300. With the margin requirement of 10 percent, you deposit 1030 only.
After three days you see that the price actually rises and you decide to close the contract and take the profit. The price has gone to 14.00 and the value of total position now goes to 14000.
So, the profit here is 14000-10300 = 3700. There may be some commissions involved too with your broker. Here you see that by depositing only 1030 as margin you are able to gain 3700 which gives you a profit which is more than 2.5 times the initial deposit you did. Thus trading CFDs with margin is profitable if the trade goes to the right direction.
How to start trading CFD with XFR Financial (XTrade)?
The best way to trade CFDs is to start trading them online. Let us understand how to trade CFD online. It is easy and all you need is to find out a good CFD broker like XTrade or XFR Financial Ltdwho can provide good CFD services to you. Check the reputation and reliability of the broker like XFR Financial Ltd or XTrade with whom you want to start trading CFDs. Register a CFD trading account with the online CFD broker to get the account credentials. The online broker provides a trading platform for online traders where you can perform all the CFD trading and also perform the analysis activities. This is how to trade CFD online with an online broker.